Page 49 - Banking Finance July 2017

REPORT

Mr. S. S. Mundra, Deputy Governor RBI spoke on range D. Urbanization will increase by 2.6% in turn will make
on issues. He particularly stressed upon the following 42% urban areas in country by 2030
points:- 6. Agriculture - Non farm sector has surpassed farm sector.
1. NPA- meticulous and religious monitoring, shift has to 7. Indian accounting standards will be revised soon. More
be from value addition to value based lending. capital will be needed to run banking business.
Information eccentricity is the need of the hour. Capital Provisioning has to be adjusted by around 30% up, after
adequacy will be challenging task. the change.
2. Green Finance 8. Technology - focus will be on cyber risk
3. Job creation-He said that there will be 69% decrease of
Advising lenders to be mindful on green finance, SS Mundra,
employment due to automation.
Deputy Governor said,"Banks would need to be increasingly
4. To emphasise on the Demand side of the market for sensitive in their lending to industries that might create a
financial Inclusion. bigger carbon footprint, to the extent of bearing further
5. Focus to be on:- exposure and reducing current exposure to these
A. Service sector companies."
B. Domestic demand driven "The World Bank has said in a report that the proportion of
C. Infrastructure - we need 43 trillion in next few jobs threatened in the country due to automation over the
years. next few years at 69 percent," he warned.

TDS on rent over Rs. 50,000 per month

With effect from June 1, 2017, any individuals who pay a rent of over Rs 50,000 per month shall deduct tax at source
at 5%. The relevant section in the Income Tax (I-T) Act - section 194-IB - was introduced by the Finance Act, 2017 and
it widened the scope of withholding tax by making individuals also responsible for tax deduction at source (TDS) on
rental payments exceeding the specified sum.
Rents in metros are sky-high and it's likely that many tenants will have to meet with the obligations of withholding tax,
depositing it with the government and also filing the relevant documentation. The silver lining is that compliance
formalities have been made easier for individuals who are tenants. The Central Board of Direct Taxes (CBDT) issued on
June 8 a notification relating to some compliance requirements.

Below is a summary of the guideline:
Do not revise your rent agreement to split up liability as rent and furniture hire: "Revising an agreement mid-way is
bound to catch the wrong attention of the tax authorities and should not be undertaken. Only if an individual is entering
into a new agreement and is actually paying for furniture hire could the drawing up of two separate agreements be
considered. Besides, the charges for furniture hire need to be realistic," cautions Amarpal S Chadha, partner (people
advisory services) at EY India.
Chadha adds, "Tenants should also keep in mind that non-compliance entails penalties. Non-deduction of tax results in
a levy of interest at 1% per month, it is 1.5% per month for non-payment after deduction. Further, non-filing of required
statement would attract penal fee of Rs 200 per day for the period of delay."

Comply with TDS norms: The government has provided for some compliance-related concessions. Tenants who are
individuals and have to meet TDS obligations are absolved from obtaining a Tax Deduction Account Number (TAN).
Further, the tax is not to be deducted each month, but merely once a year. "The tax is required to be deducted at the
time of credit or payment (whichever is earlier) of the rent, in the last month of the financial year, or the last month
of tenancy if the flat is to be vacated during the year. Since individuals would not be maintaining books of accounts, the
tax would typically be deducted at the time of payment," says Chadha.

BANKING FINANCE | JULY | 2017 | 49

Sashi Publications Pvt Ltd Call 8443808873/ 8232083010